The US government has capped the penalties for the late payment of bills by credit card customers, as part of the Credit Card Reform Act. The late fee has been capped to 25 dollars or the minimum payment that is due from the customer, whichever is the lower amount. This has finally ended the practice of charging hefty fines on credit card customers. According to the new regulations and rules, the issuers of credit cards are required to give 45 days` notice before any increase in the interest rate on the credit card balances. Apart from this, the credit card issuer has to provide a reason for the increase in the interest rate. Also the interest rate cannot be changed in the first one year after the account has been opened. Most importantly, the credit card customers can cancel their card during this notice period.
For the US credit card customers, this crackdown is one of the most beneficial results out of the efforts out of White House to bring wide swept reforms in the financial services industry. This has also led a battle with Wall Street in a long wrangle with Congress. Interestingly these reforms are also backed by the American Bankers` Association. However, experts are fearing that these wide spread regulations which will affect the profitability of the credit card issuers might result in the increase in interest rates on the cards. This would be a strategy that credit card issuers might use to make up for some of the losses in revenue.
According to a banking analyst at Credit Suisse, earlier most of the credit card issuers used to charge a small number of irregular card holders but now the cost would be spread out over a more uniform base. The new regulations have also been praised a lot by consumer advocates who think that the measures would enhance the visibility for the customers. The regulations will help customers to be aware of what they are actually paying for in the opinion of Susan Weinstock, who directs financial reform at the Consumer Federation of America.
The interest rates at the height of the credit crunch had increased massively to about 29.9%. Credit card issuers have been criticized for their actions such as quietly raising the interest rates without letting the customers know, especially for those customers who have a bad credit record and are vulnerable to those changes.